Electricity could become up to 26.5% cheaper with consumers switching to the free market

Residential consumers and small and medium-sized businesses can reduce their electricity bills by up to 26.5% by migrating from the regulated model to the free energy market, where they will have the freedom to choose their supplier. These calculations are from Volt Robotics, a company specializing in energy regulation and trading.

The flexibility was authorized by Provisional Measure 1.300, currently pending in the Chamber of Deputies. The legal framework allows homes and small businesses to break away from the fixed, often high, tariff models of traditional utilities. Unserved segments of industry and commerce will be able to adopt the model starting in August 2026. Residential consumers will be able to do so in December 2027.

Who can benefit from the changes?

Approximately 58.4 million users could benefit, with estimated savings of up to R$7.6 billion per year. By contracting energy directly from generating or trading companies, a layer of intermediaries is eliminated and the dynamics of a competitive market are embraced.

The effects, however, won't be uniform. Consumers in the Central-West region, for example, could see an average reduction of 15.2%, with the Federal District leading the national ranking, potentially achieving an impressive 26.5% reduction in energy costs.

In the South, the average savings is 12.9%, while in the Southeast, the estimate is 12.6%. The North and Northeast, while also benefiting, expect more modest reductions of 9.8% and 9%, respectively. Last on this list, Paraíba is expected to see the smallest savings, with an estimated reduction of 5%. The difference is explained by variations in the values and tariff composition of regional distributors.

Promise is already three decades old

The idea of a more open energy market isn't new. It's been around for 30 years, with the enactment of Law 9.074/1995. The law originally opened the market to large consumers—those with a load equal to or greater than 3,000 kW—and signaled future expansion to everyone.

In September 2022, under former President Jair Bolsonaro's (PL) administration, the Ministry of Mines and Energy published an ordinance allowing all high-voltage consumers to join the free market. Prior to that, only 0.03% of consumers had the freedom to contract directly with generators, according to the Brazilian Association of Energy Suppliers (Abraceel).

For these major players —large commercial and industrial companies—the migration represented significant savings, ranging from 30% to 50% in energy costs. This successful track record with large consumers raises hopes for the low-voltage market.

The opening of the free energy market to low-voltage consumers will take shape in two clear phases:

• First, for the industrial and commercial sectors that have not yet been covered, starting in August of next year.
• Residential consumers will have their turn in December 2027.

International experience serves as a warning

Despite the optimism, international experience serves as a warning sign. Joisa Dutra, director of the Center for Studies in Regulation and Infrastructure at the Getulio Vargas Foundation (FGV Ceri) and former director of the National Electric Energy Agency (Aneel), explains that market opening in other countries was aimed at reducing costs and gaining efficiency through competition. However, the results were not always as expected.

The British case is a striking example. After facing supply problems from open market companies, many consumers sought refuge with the old utilities, prioritizing safety. The lesson is clear: competition, however beneficial, requires solid regulatory frameworks to function properly .

This is a bottleneck in the Brazilian model. In more mature markets, energy trading operates with a balance between supply and demand: buyers signal how much they are willing to pay, and sellers set their minimum prices. "This alignment between supply and demand is what allowed us to generate prices that provided important signals for the system's operation and expansion," observes the FGV Ceri specialist.

This crucial dynamic is not provided for in the Brazilian measure , an element that could compromise the efficiency of the free market. According to Dutra, the absence of this mechanism could generate price distortions that will ultimately penalize the end consumer . This is a point of utmost concern for Congress, which is evaluating the MP.

The main challenge of the new rules is regulation

One of the main challenges of liberalization lies in the strict regulation of companies operating in the free market. There's a need to ensure that suppliers honor their contracts and, above all, that consumers don't run out of supplies. Supply security is as vital as saving money.

Another sensitive issue is the costs of overcontracting by distributors , Volt Robotics points out. In a massive migration scenario, distributors may be left with "excess" power purchase agreements, generating costs that need to be addressed. If these costs are simply divided among agents, without a sustainable solution, the benefits of migrating to the free market could be drastically reduced.

The energy trading company's warning is blunt: this cost shifting could negate the promised efficiency gains, transforming liberalization into a mere redistribution of burdens among different consumer groups.

Digitalization in measurement can help the free energy market

Technological modernization can serve as a catalyst for the expansion of the free energy market. In June, the Ministry of Mines and Energy (MME) updated the guidelines for the digitalization of the metering system through Ordinance No. 111. The ministry states that this change can bring unprecedented transparency to consumption and the functioning of the free energy market.

According to the ministry, digitalization can enable the implementation of Open Energy – a concept similar to Open Banking in the financial sector. This would allow consumers to share their consumption data with different companies, seeking more competitive and personalized offers.

The director of FGV Ceri sees this measure as a "democratization" that allows marketers to design products "more suited to the different realities of their customers, generating benefits." She warns that technology alone doesn't solve all problems.

In the United States, the installation of a digital metering system resulted in dissatisfaction among 97% of consumers. To avoid a similar experience in Brazil, Dutra believes that modernization should focus primarily on increasing efficiency for the consumer , not just operational benefits for power distributors and generators.